September 20, 2011

It was Romer's first meeting with the President-elect in November 2008. According to Ron Suskind's book "Confidence Men: Wall Street, Washington, and the Education of a President," Obama had "a woman problem: too few of them in key jobs" and he was trying to bring in Christina Romer. And "It’s clear monetary policy has shot its wad" is what Obama said to her before even "hello." Is that how you talk to a woman?

Remember the old movie line "You had me at hello"? According to Suskind, "For Christina Romer it was love at first sight." What woman in love wants to say "You had me at shot its wad"?

It was a strange break from decorum for a man who had done so outstandingly well with women voters. The two had never met before, and this made the salty, sexual language hard to read. Later it would seem a foreshadowing of something that came to irk many of the West Wing’s women: the president didn’t have particularly strong “women skills.” The guy’s-guy persona, which the message team would use to show Obama’s down-to-earth side, failed to account for at least one thing: What if you didn’t play basketball or golf? Still, for the moment, the comment didn’t faze Romer. She was curious to hear what he thought.

“What do you mean?” she asked.

Obama extended his hand, now ready to greet her. “I guess we need to focus on fiscal policy,” he said.

“No, you’re wrong,” Romer corrected him. “There’s quite a bit we can still do monetarily, even with the historically low interest rates.”

Isn't that just like a woman... not understanding that the need for a refractory period?

IN THE COMMENTS:jakebadlands said:

Not only does this phrase have other, non-sexual meanings, is the sexual meaning even the primary one?

Though being in the presence of Mr Obama, I imagine Ms. Romer's thoughts could not help but turn to the sexual.

X said:

says more about Romer and her dirty mind that lacks knowledge of guns.

EDH said:

Musket Love?

"The two had never met before, and this made the salty, sexual language hard to read."

I wonder if that "salty" part was a Freudian slip in Suskind's part?

The actual origin of "shooting your wad" is from musketry.

In some current American slang it is a reference to male ejaculation; however the phrase has a very long history covering most of the time that muskets have been in use up to the present. The wad is a piece of paper put in the muzzle along with the projectile and gun powder. If the shooter is too hasty -- say in a tense battle -- they may not include the projectile. The result is a fire without the intended bullet; only the wad will fly out...a wasted shot. Hence, "shooting your wad" can mean expending your energy fruitlessly. The OED also references the wad as in a roll of paper money; in this case "shooting your wad" means blowing all your cash at once. [Link.]

"The two had never met before, and this made the salty, sexual language hard to read."

I wonder if that "salty" part was a Freudian slip in Suskind's part?

The actual origin of "shooting your wad" is from musketry.

In some current American slang it is a reference to male ejaculation; however the phrase has a very long history covering most of the time that muskets have been in use up to the present. The wad is a piece of paper put in the muzzle along with the projectile and gun powder. If the shooter is too hasty -- say in a tense battle -- they may not include the projectile. The result is a fire without the intended bullet; only the wad will fly out...a wasted shot. Hence, "shooting your wad" can mean expending your energy fruitlessly. The OED also references the wad as in a roll of paper money; in this case "shooting your wad" means blowing all your cash at once.

I'm assuming everyone knows the origin of the term "shot my wad"? No it wasn't from the John Holmes series of execrable detective pornos from the 70's. All cannons from from the mid 19th century and before had a "wad" placed between the gun powder and the cannon ball. When the cannon ejaculated, er, shot off, er, fired the ball the wad came out with it. Thus the terms usage. Unless of course you're using it as a noun and then a "wad" is a pledge. That usage would seem appropriate here if slighty more risque.

"Shooting your wad" is a double entendre; the gun "wad" and the blue dress "wad". It usually refers to the latter. And I surmise the latter is the only "wad" the prez has ever shot. So we can deduce that was his meaning

I'm younger than Prof. Althouse, but I still see this traditional definition/connotation first. There's that, and the fact that my mind is not in the gutter.

You are making a very large assumption that the original artillerymen and musket users didn't get the reference from an older sexual connotation (as soldiers are wont to do). I say cite the proof it's not or man-goo it remains.

Christina Romer, if you are of such a delicate constitution that you can't accept salty language or men who don't have "women skills" (who don't treat females like a delicate girl rather than as equals), please step back and stop embarassing the rest of us real women who actually can handle ourselves in adult situations.

I doubt that's true; recall that W famously nicknamed Rove "Turdblossom". Gentlemenly behavior is nice, but if a man is guarding his word usage because there is a female co-worker, particularly one who he has given extraordinary responsibility such as that of Secretary of State to, he's patronizing her and not treating her as an equal.

If women want to be treated as equal to men, they need to be equally as sensitive and converse on the same levels.

"Blank cartridges frequently contain a paper, wood or plastic plug called a wad which seals the powder in the case. This wad can cause severe penetrating wounds at close range and bruising at medium ranges."

"Wad" is related to firearms...which "shoot". Back in the day of muzzle-loaders, once you had fired (or "shot") your wad from your firearm, you'd have to go through a lengthy process to reload it.

For fuck's sake, Althouse, maybe think a bit before you jump to "sexism".

What Lyssa said. I worked in a brokerage firm for years and before the Clarence Thomas hearings, the language was pretty salty around the office. If you couldn't take it you were free to leave. Then it all changed and we women were supposed to be protected from the brutes around us. As a result, a lot of good, really dirty jokes were only told in the men's room.

"... If women want to be treated as equal to men, they need to be equally as sensitive and converse on the same levels..."

Hahahaha...oh sorry.

Unfortunately, in the real world, making such a statement to a female coworker will typically land you a visit with the HR department.

Years ago I had a calendar hanging on the inside of my cubicle, you had to walk in and then turn around to look at it. Each month showed a WW2 bomber nose art, many if which showed scantily clad ladies (though none nude). As you might guess I was instructed to remove the offensive calendar because someone complained.

All it takes is just one perpetual victim who seeks offense in everything.

Looking at the comments, you guys are assuming she was taken aback at the 'salty' language. I say she was taken aback with his ignorance which is why she asked for an explanation and then disagreed with him. She was right!

Obama was a civil rights lawyer. Did he not realize that he was creating a hostile work environment for Ms. Romer?The most remarkable thing that I have read about the Suskind book is that it says that candidate Obama had to take a crash course in economics (http://www.nytimes.com/2011/09/19/books/ron-suskinds-confidence-men-focuses-on-obama-review.html). Two years as a humanities undergrad at Occidental, two more years as a poli-sci under grad at Columbia, and three years at Harvard Law, including a stint as HLR president, and he needed a crash course in economics?We are so screwed.

Glen Wishard said... Obama knows as much about monetary policy as he does about 19th century musketry, and he just repeats what other people tell him.

-----------During primary 2008, there was a quote in a LA Times article from a prof at Harvard (I think), who (paraphrasing) had said that Obama is a pseudo intellectual who blends in with a smart crowd and learns to say the 'right' things pretending to know a lot.

OriginalMike,Hell no Obama hasn't been proven right about monetary policy.

Absolutely the only thing that's really appeared to improve anything in the last two years were the two monetary policy actions by the Fed.

I would argue that those actions have been too limited to generate the kind of full recovery we'd like to see, but it's quite clear if you study the data that they're responsible for the partial recovery we've seen.

In that respect, it well fits the observations Romer made about monetary and fiscal policy in the Great Depression.

Significant monetary policy hasn't failed, it hasn't been tried. Obama can largely pin that on himself too, since he didn't even bother filling open seats on the Fed board for two years of the worst economic crisis we've had in 80 years.

Daily Beast just linked to tidbits from Suskind's book. Don't know if they're "new", but this one by Anita Dunn is damning, and balls-on exactly what I think is the guy's fundamental flaw, that he's a fictional character.

..."It was only after Republican Scott Brown won the race for a Massachusetts Senate seat that Obama seemed to realize his inspiring life story wasn’t a governing strategy. “What is my narrative? I don’t have a narrative,” a lost-seeming Obama told senior staff. One staffer who was there told Suskind, “For someone like Obama, that’s like saying I don’t know who I am.”..."

That Obama arrived at a time when just enough of the electorate was stupid or disaffected enough to treat a presidential election like the casting of a TV show created a confluence of conditions that hit our country like a ton of bricks. Worse yet, they signed on for four full seasons, with NO buyout or escape clause, so out first hope of cancellation is still 14 months away. Worst. Show. Ever.

If this blog is meant to educate--in the "broadest" sense of the word--then it is a success. Prior to Althouseblog, I thought 'shot his wad' was a term from old military weapons, meaning the gun was empty--nothing left to fight with based on the time period to reload a "wad" in the heat of battle. Now it's sexual, the time period between male ejaculations. At 17 I conducted an experiment, my 'personal best' in 24 hours was 7--I felt 77 at the end.

Look, I work in a highly male-dominated field and frankly, like the atmosphere it entails. And this anecdote is pretty lame. However, D.C. has one of the most retrograde, obnoxiously sexist professional atmospheres around. This crosses party lines, as the waitresses who used to serve Chris Dodd and Teddy Kennedy could attest, as well as Mark Steyn (who was hilariously felt up by Strom Thurmond in an elevator when Strom aimed for the young lady by him and missed). So, I am sympathetic to women who are trying to do an important job and having to fight their way past blowhards like Summers and Rahm.

Looking around some more, I see that the phrase "monetary policy has shot its wad" has been attributed to Paul Krugman, but I think the author is long-time liberal blogger Mark Byron, who blogged in 2002:

"This means that monetary policy has shot its wad, aimed the cannons at the economy like in an old Godzila flick, and saw it just bounce off. 'General-what do we do now?' This leaves fiscal policy, cutting taxes and boosting spending to try and jump start the economy."

I'm not even willing to give Obama credit for reading Mark Byron. But it is possible that he once had a conversation with somebody who once read Mark Byron.

Here it is: Winning the white house isn't everything! (Richard Nixon should have already shown those who do win a lesson, or two.)

Then, you have the elder Bush's "lesson." Lyndon Baines Johnson's lesson (even if he did kill to get the job.)

And, of course, Dubya's "flights of fancy, that he was the decider-in-charge.")

But Obama thought he had a "leg up" ... because he was picking favorites among the New York Times set. And, he chose Rahm Emanuel to all the necessary screaming and yelling for him.)

How Suskind was able to watch Anita Dunn actually speak ... as her tongue flops forward so much ... It's a wonder he took her statement that Obama had a "hostile" work environment seriously."

No. Obama did not!

He just didn't think an asshole like Pelosi would shoot through his "wad" ... leaving behind a NO CHANCE TO CLIMB BACK UP ... "winnah" thing.

Poor Obama is left only with his own anger. And, a total FAIL in all the policy departments he has tried.

He's also got Hillary on board. (And, if she can't drag down his ass, nobody can!)

Obama's shortfall was up on top of his head. As stupid as others have been. But not quite realizing that the job wasn't just "golfing" ... and "speechifying." He has clubs for one. And, a teleprompter for the other.

And, he's a flop.

Doesn't mean he was EVER gonna favor Israel!

Heck, If Obama wanted my advice ... I'd have told him to pick up Tony Blair by the ankles ... and shake him ... just to see all the saudi money flying out of his pockets.

But Obama likes the saud's.

So he doesn't think about the obvious stuff that would have stood him in better standing.

In presidential races, there's no advantages to buying an early ticket.

Sometimes, some shmuck like Ed Rollins shows up. And, seems to think he collects cash by making a "front runner." But he didn't do this for Michele Bachmann. Indeed, all he did was take stabs at her. Which, in his fashion, he then tries to use to make himself rich.

While the horse to watch?

I think it's Ron Paul's horse. He is collecting a serious following now, among America's youthful voters. And, the Independents ... which are runs through a wider age group.

Does this mean it's gonna hurt Perry?

If there's an Independent run ... Obama probably thinks he's gonna be a second-termer ... because of the way the "plurality" breaks.

Better questions, of course, would be ... Would Perry offer Ron Paul a chance to be his veep?

Biden's a waste of time.

And, replacing Biden with Hillary would be something only a shmuck would do.

It's still amazing to me that Obama hasn't learned a thing about diplomacy. (Neither did Dubya.)

While at the end ... if he's a failed one-termer ... he's gonna be handing out pardons to all his czars. And, everybody at Justice ... Including Eric Holder. And, Geithner.

Maybe, he will hand them out ONLY if they sign secrecy agreements? Maybe, he wouldn't give one to a person whose word wouldn't be good enough to trust?

What I read in that encounter is a president with no real financial experience or understanding lecturing a world-famous economist on the economy and not really listening to what she has to say, because he already knows it all.

Obama's greatest failing has always been that he doesn't know and that he doesn't know that he doesn't know.

Then, "You're about to be the President. You'll have to retire the phrase 'shot its wad.'"

Or she could have run with it and answered, "Yup, we'd better bend over and grab our ankles because we're about to get boned, though I will say that there are still some panty-wetting options out there that we could take a peep at."

And since about half the country self-identifies as conservative we have the answer as to why our President is President of only half of the people and has never tried to be President of all of the people.

Personally, I'd never even heard of it being used as a sexual remark before, whereas I am familiar with both it's musketry and financial meaning. Both of which were precisely on point to what President Obama was saying. So is Romer a dirty minded ignoramus, or an eager to be offended hypersensitive?

Michael, couldn't disagree more. Perhaps two years too late, Obama appears to have finally quit trying to appease intransigent Republicans. Now if he would fire Geithner, we might be able to really get somewhere.

OriginalMike,QE and QE2 were empirically helpful in that you can see they changed peoples expectations. This led to moderate boosts in GDP and employment.

No, they weren't "smashing successes" in the sense that they fixed everything, but that's an unrealistic expectation. A percent or two annualized increase in GDP or reduction in unemployment is still a good thing.

I'd simply say:* It's a lot more than fiscal policy accomplished.* It was accomplished at much lower cost compared to fiscal policy.* No, it's not a cure all. It won't get us to where we need to be all by itself, but it needs to be combined with fixing the vast array of structural problems government policies have created, made worse, and failed to fix.

"Perhaps two years too late, Obama appears to have finally quit trying to appease intransigent Republicans."In the Mahal alternate universe . . .The stimulus? Written to appease the GOP minority. Had to read Pelosi & Reid the riot act to pass it while the GOP fell in line.Obamacare? Ditto. That's why it was deemed passed in reconciliation rather than put to an up-or-down vote. So may GOP'ers wanted to vote for it that the Dem's were deserting it in droves.In the 2010 elections the voters expressed their disgust with this appeasement of what was, essentially, a rump party consisting of Randian libertarians and revanchist confederates by consigning them to the dustbin of history.

In the 2010 elections the voters expressed their disgust with this appeasement of what was, essentially, a rump party consisting of Randian libertarians and revanchist confederates by consigning them to the dustbin of history.

Here's something relating to the idiot many here are supporting to be the President:

On her visit to a traffic-signal plant [in Iowa] Monday, Republican presidential candidate Michele Bachmann called it an example of how President Obama’s policies are “continuing to dig us deeper into the hole toward another recession.”

Standing before a row of shiny orange trailers carrying portable solar-powered traffic lights, she said her plans for a smaller government with fewer rules and lower spending would help OMJC Signal Inc. “grow, grow, grow, grow, grow.”

So, what’s the problem? As it turns out, OMJC Signal Inc. thrives thanks to government contracts — more than 80% of the company’s revenue comes from government — which allows it provide portable traffic lights, solar-powered bus-stop lights, and traffic cameras for projects nationwide.

The company’s CEO is a self-identified conservative Republican, who was apparently loath to ruin Bachmann’s appearance, but he conceded to reporters that his company benefited from the kind of projects promoted by President Obama and congressional Democrats.

Indeed, thanks to efforts like the Recovery Act, OMJC’s business “has been stable,” even when other local companies were forced to scale back.

Asked for an explanation, Bachmann’s spokesperson complained about health care reform and “excessive spending,” apparently unaware that the response doesn’t make sense under the circumstances.

Obama hit her out of the blue with a bold statement in her area of expertise. Instead of sputtering, hemming and hawing or saying, "You may be right Mr. President, but. . . ", she said, "No. You are wrong."

If you are a President hoping to find out who the sycophants are and are not, hasn't Romer just risen in your estimation?

That phrase has a more well-known innocent origin: Centrifugal governors on steam engines would allow the highest rpm when their weights were farthest from the axis of rotation, or "out".

Frankly, I don't know how "balls out" can be dirty. What would that even mean? "That concert was balls out." Was it particularly intense because its testicles were exposed? I mean, when PaddyO gets really worked up, does his zipper come down and his balls, just his balls, make their appearance?

Oh, and watch out, everyone -- Freeman Hunt's talking dirty again. The last time this happened, she was dropping f-bombs, c-words, and shit I had to look up in the Urban Dictionary for an entire thread.

BJM, despite Obama's hectoring tone towards the GOP and vocal dismissal of the GOP's economic policies, despite Obama's promoting and signing major legislation with no support or only token GOP support, it is an article of faith on the left that Obama is "appeasing" the GOP.It is called a bubble. Obama is smarter than his base; he knows that if he pushes the policies of the socialist portion of his base, he will accomplish exactly nothing. Even the dem's in congress would abandon him. Their goal is to serve their constituency (however defined) and so be re-elected.

OriginalMike,Sorry, but that's a bunch of pseudo-philosophical nonsense. If you get sick and I give you medicine, it's not "proven" the medicine helped and not your prayers to a magical sickness curing fairy.

But insofar as we can measure things, the evidence strongly points to the medicine, which is a measurable phenomena with a strong theoretical underpinning and not the fairy.

I'll concede that monetary economics isn't some sort of common sense thing. It's often counterintuitive, but it is scientific. We can see its effects, both positive and negative. We've measured the effects of QE and seen positives. We've not seen major negatives.

Original Mike said... ""QE and QE2 were empirically helpful in that you can see they changed peoples expectations. This led to moderate boosts in GDP and employment."

That's an assertion on your part, Mike. Possibly the moderate boosts in GDP and employment were in spite of rather than because of QEs 1 and 2. I can't prove it. Nor can you prove the reverse.

What is undeniable, however, is that the Fed pulled a lot of money out of thin air. It's hard to imagine that's a good thing."

ANY increase in GDP is due to devaluation of the Dollar. GDP is not how many widgets sold, but how many dollars spent-- and also includes GOVERNMENT SPENDING.

If one devalues the Dollar then anything priced in Dollars costs more. If an additional 7 Million are unemployed, and 14% percent of the Population is now on food stamps, then of course Government Spending, and the percentage to Private sector spending, rise.

Small GDP (which is Spending, not Income) gains have only been due to the effects of an exponentially inflated money supply, and resulting rise in prices, and the resulting increse in government spending (including handouts) due to Debt saturation.

"I'll concede that monetary economics isn't some sort of common sense thing. It's often counterintuitive, but it is scientific."

The problem with your medicine analogy is that we can give the same medicine to 10,000 patients and observe the results. That is something that simply can not be done with an economy. To put it one way, there's no control group. Nature of the beast.

The older I get, the less confidence I have in economics. As a physical scientist, I see nothing scientific about it.

"I'll concede that monetary economics isn't some sort of common sense thing. It's often counterintuitive, but it is scientific. We can see its effects, both positive and negative. We've measured the effects of QE and seen positives. We've not seen major negatives."

The denial is just stunning. An additional 7 miliion are unemployed, the percentage of those in poverty and on food stamps are at record highs. Wake up, the Usurper is here to destroy.

"shooting one's wad" (or more correctly, "blowing one's wad") is not "salty, sexual language". What an ignoramus the author is!

The expression refers to having a wad of money, and going out and spending it all. Google it; it's true. While people as ignorant as I used to be tend to think it's a gross sexual remark about jizzing all over the conference table or something, it just isn't so.

Editors and the writers in their charge are sorely lacking in any signs of erudition or even basic education anymore. The lunatics have taken over the asylum.

Next thing you know, they'll outlaw the use of "niggardly" on account of its being racist. Oh, wait.....

James said..."Blank cartridges frequently contain a paper, wood or plastic plug called a wad which seals the powder in the case. This wad can cause severe penetrating wounds at close range and bruising at medium ranges."

"However, on October 12th, 1984 after a long and draining day's shooting on the set of "Cover Up: Pilot (#1.0)" (1984), Hexum became bored with the extensive delays and jokingly put a prop .44 magnum revolver to his temple and pulled the trigger. The gun fired, and the wadding from the blank cartridge shattered his skull, whereupon the mortally injured Hexum was rushed via ambulance to hospital to undergo extensive surgery. Despite five hours of work, the chief surgeon, Dr. David Ditsworth, described the damage to Hexum's brain as life-ending. One week later, on October 18th, he was taken off life support and pronounced dead. However, Hexum's commitment to organ donation meant five other lives were assisted or saved with organs harvested from him. The youthful & charming Hexum was dead at only 26 years of age."

"Shot its wad" is pretty mild talk compared to the way Democrats usually talk. They're the party of "effin' this and effin' that." Joe "Big Effin' Deal" Biden, John "what the eff" Kerry, John Murtha. Whenever you read or hear candid remarks from Democratic politicians it is just amazing how often they throw around vulgarities. It's like they think they have to talk obscenely in order to seem like a grown up or something. Either that, or they hang out with the teamsters too much.

But the Fed's mission is mandated by congress. Just because it is independent does mean that it sets its own goals and priorities without oversight:

http://www.federalreserve.gov/aboutthefed/mission.htm

MissionThe Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.

Today, the Federal Reserve's duties fall into four general areas:

conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers maintaining the stability of the financial system and containing systemic risk that may arise in financial markets providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system

OriginalMike,Medical studies are typically less rigorous than we'd like too. In economics, we don't have perfect controls, but we do have a surprising wealth of history and circumstance to pull from which somewhat makes up for it.

To wit, Christina Romer's careful and effective study of monetary and fiscal policy during the Great Depression era.

Obama is supposedly so lyrical. That's what bothers me about the phrase. It's so basic. His big skill is supposedly his word mastery. But the most offensive thing about the phrase is its banality. Can Obama really write well, or did someone else do his writing for him?

"To wit, Christina Romer's careful and effective study of monetary and fiscal policy during the Great Depression era."

It's my understanding that there is great deal of controversy regarding the economic policies of the Depression, including economists who argue we made things worse.

I don't mean to rag on you (oh, oh; can I say "rag"?) and I'm sensing that I'm talking to an economist and I don't want to offend, but I've come to the opinion that the best humanity can do is behave fiscally conservatively (e.g. don't spend way over our means, etc.) and provide for as much economic freedom as possible for the market (that does NOT mean no regulations). To excessively intervene in that market (e.g. the housing debacle) leads to calamity and to think we can right the ship once it's gone off the rails (to mix metaphors) with "smart" economic policies is hubris. The root cause of the problem (e.g. excessive debt) must be fixed.

Wish I could continue this discussion, but I'm off for a well deserved (if I do say so myself) vacation.

Original Mike, I think that some economic facts can be rigorously determined, but the means of achieving some rigorously defined condition (like "full employment") are not rigorous because all the participants are actively trying to game the system & produce the best results for themselves.It may be a fact that less than full employment indicates less than a 100% efficient economy, but that doesn't mean that the effects of a policy to reduce unemployment will actually reduce unemployment, or won't do so by introducing inefficiencies elsewhere in the economy.

Many people think 'balls to the wall' has a sexual meaning. It refers to older aircraft which had balls on the throttle levers. To push the throttle levers toward the firewall was to summon full power—thus balls to the wall.

Original Mike,Enjoy the vacation. I don't necessarily disagree with your big picture conclusion, and it might surprise you to know that most economists probably wouldn't either.

The big problem is that monetary economics is explicitly not market driven. I'd argue, with solid theoretical backing, that you could improve on the technocratic Fed by replacing it with a good futures market.

But from a pragmatic perspective we're clearly not there yet. And in a modern, mostly market driven economy, deflation is not only a huge job killer, it makes getting out of debt much more difficult.

Let's think of an example. Almost all of our debts are incurred based on a presumed inflation rate that's built into the borrowing interest rate we pay. So if you got a 6% mortgage back in 2005, probably 2-3% of that interest rate was assumed inflation.

That is, the lending agreement was based on (imperfect) beliefs about the future. To the extent that inflation is higher than the agreement predicted, the lender will get a lower real return, and to the extent that inflation is lower, the borrower will have to pay more than expected in real terms.

Since 2008, inflation has in fact been well below its previously expected trend, and the result is that it's that much more difficult to pay off our debts.

While common sense tells us we want money to "hold its value", the reality is that money never has a constant value because the real goods and services we can purchase are constantly changing in value.

I always suggested my students consider the "money supply" of a poker game. You want the supply of chips to grow as the stakes of the game grow, because otherwise it becomes increasingly difficult and subjective as to how to even measure the chips. Suppose everyone runs out of chips, and your opponent throws his watch, his car keys, or a night with his wife on the table and says he's "all in"?

That makes for a good movie, but in reality it's hard to say how you respond. In practice, there'd be lots of haggling over value. How hot is his wife? How many miles does his car have on it?

Increasing the money supply provides exactly the same functionality for the economy as increasing the supply of poker chips via an honest broker house in the card game. It facilitates private transactions. Conversly, letting the money or poker chips dwindle tends to kill the game and make it more difficult.

"The big problem is that monetary economics is explicitly not market driven."

I don't know that it will come up again but one of my teachers (for Phil 157, a critical thinking/English class) tossed off a number of tossed-off remarks about free enterprise and market forces that bugged me, but I didn't realize that along with all of the other problems with his little "the free market doesn't work, Fanny and Freddy anyone?" and "Cuba is lovely," quips that there was actually a understood division between money and markets.

Just for future reference, would you mind terribly explaining what that means in terms that work for someone who isn't an economist?

I don't understand the poker game analogy.Couldn't you just make a rule against people gambling with anything other than chips? Rather than just flooding the game with chips when some of the players want more?If everyone knew at the start of the game that the rules were that they could only gamble with the chips they bought from the bank at the start of the game, how would that negatively influence the outcome of the game?In real life people who depend on an Angel delivering them from their bad choices should run into limits.

Synova,To explain why money and markets aren't the same, think about it this way:1. You can have a market economy without any money at all. Just people making and trading stuff.

2. The basic market proposition is that people, though often mistaken, are usually right, so when people voluntarily trade something they make or have for something someone else makes or has, both sides are better off. Sure, you might make a mistaken trade here or there, but the average person makes thousands and thousands of trades and if they were usually getting worse because of them, they could stop. So there's a strong presumption that if people trade voluntarily, each side will be better for it.

3. Notice we haven't talked one bit about money? Why have money then? Because it allows us to make these beneficial trades much easier. Without it, the person who wants what I have also has to have what I want. With it, I can sell what I have to those who want it, and then go buy what I want from other people. Also, I can save the money and spend it later.

4. So money makes beneficial trades easier and that's why we have it. It vastly increases the value we can create from trading.

5. Thus, the optimal amount of money to have on hand is a society, unfortunately, is sort of like Golidlocks' porridge. Not too cold (too little money) because that makes it more difficult to conduct beneficial trades. Not too hot (too much money created), for basically the same reasons. If all prices suddenly doubled (imagine waking up with twice as much money in your bank account) we'd be happy about it at first, but then be pissed shortly after when we realized our extra money didn't get us any extra stuff. Worse, we'd waste time and money learning this.

6. So basically, as the scope of our trades and economic activity grows, the easiest way to keep things fairly stable is to try and increase the money supply at about the same rate.

7. People are going to screw this process up though, because people are fallible. In the grand scheme of things, it's better to slightly (no Zimbabwesque hyper-inflation!) overshoot than it is to undershoot.

8. Why? Because people have both real reasons (saving, investment, expectations about the future, and balance sheets based on them) and psychological reasons that might not be very rational (money illusion) that tend to favor increases easier to deal with than decreases.

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The rest of the stuff, I think the guy was just being a twit. Cuba might be a wonderful place, but it'd be a more wonderful place without an oppressive communist dictatorship.

And Fannie and Freddie were government sponsored and backed entities. In a truly free and private market, they wouldn't have been created and loans would be handled privately, often with less of an eye toward policy agenda and more of an eye toward risk.

Well, no analogy is going to be perfect, but the idea is that in poker, the real limit you have to bet with isn't the chips, which only represent your wealth, but your actual wealth.

Limiting the game to the chips you have limits the stakes. We might have moral reasons for doing that in a poker game, but not with economic transactions. We want more of those to happen because we have that strong presumption that voluntary trading is beneficial and adds value to the economy.

Ever play Monopoly when you were little and run out of money? When I was a kid, my friends and I printed up extra money rather than simply stopping the game or undertaking devaluing mind numbing math of devaluing the prices of every piece on the board.

"If all prices suddenly doubled (imagine waking up with twice as much money in your bank account) we'd be happy about it at first, but then be pissed shortly after when we realized our extra money didn't get us any extra stuff."

I recall a Scrooge McDuck (?) comic book with Huey, Dewey and Louie from nearly 40 years ago, where this happened. ;-)

"And Fannie and Freddie were government sponsored and backed entities. In a truly free and private market, they wouldn't have been created and loans would be handled privately, often with less of an eye toward policy agenda and more of an eye toward risk."

Oh, I got that part. Absolutely.

Fannie and Freddie might have been a failure of regulation, but they weren't a failure of a free market because they were never an example of a free market.

Should I really be allowed to gamble all of my future economic output? If I win it is great, but if I fail it is slavery.

That wasn't my argument :)

My point was that just as poker chips facilitate bets in a game, money facilitates trades in an economy.

The best part about this is that unlike gambling (a zero sum game- if I win, you must lose by an equal amount), voluntary trades are typically positive sum games (both sides end up better off, though usually by varying amounts.

Whether we should be allowed to bet all of our economic output and sell ourselves into slavery is more of a moral question about gambling than an economic one :)

Personally, I'd say we shouldn't be encouraged to do this, but we can't truly be prevented from doing it.